Taking Stock

By year’s end, two of the grocery industry’s most tenured CEOs will have departed and another could well be on his way out in the next few months.

On May 14, Steve Burd officially retired as Safeway’s chief executive (a move that was first announced in January), completing a distinguished 20 year run as leader of one of the world’s largest grocery chains. Burd’s Hall of Fame legacy was highlighted by his ability to pinpoint waste and duplication in a business that’s uniquely labor and capital intensive, while also creating new internal efficiencies that made Safeway an industry model of financial discipline. Burd’s leadership in the field of health care and Safeway’s development of its Blackhawk gift card network also merit special recognition.

To no one’s surprise, Robert Edwards, who has been president of the Pleasanton, CA merchant since 2012 and CFO for eight years prior to that, was appointed chief executive. I take nothing away from Edwards, who certainly has been groomed for the top job and has the financial acumen to continue to lead Safeway in a similar manner than Burd. No doubt, there is something to be said about continuity and culture preservation.

But could Safeway’s board have been a bit bolder and chosen someone with more of a merchant background as the company’s new leader? The foundation that Burd has laid since he left the consulting business to join Safeway in the early 1990s is well-established and I’m confident that Edwards will continue to manage the retailer efficiently. But is that what the big chain really needs now? When viewed against its biggest national competitor – Kroger – Safeway lags behind in many areas. Kroger provides more sizzle with its diverse store formats, local merchandising (and regional item selection) and more aggressive real estate plan. Just comparing Kroger’s Mid-Atlantic division (based in Roanoke, VA) and Safeway’s Eastern division (based in Lanham, MD) the differences are obvious in those areas. To this reporter, this has less to do with the abilities of local management and everything to do with the capital resources and flexibility (or inflexibility) of how the corporate office manages its divisions.

Edwards could make Safeway a game changer again if division president Steve Neibergall were given more freedom and more cap-ex was devoted to remodeling additional stores. Safeway’s locations remain excellent and its local team is knowledgeable and skilled, yet the company’s rigidness has adversely impacted the Eastern division in recent years as conventional operators like Wegmans and Harris Teeter have impacted Safeway’s share of market and other merchants such as Wal-Mart, Target P-fresh, Costco, Whole Foods, Trader Joe’s and hundreds of dollar stores have created gridlock for all supermarket operators in Baltimore-Washington.

We’ll be tracking the Robert Edwards regime closely over the 12 months. In the meantime, we wish him well in his new post.

At Brussels-based Delhaize Group, Pierre-Olivier Beckers will be retiring as chief executive at the end of the year at the young age of 50. At first blush, retirement at that age almost begs the question “was he pushed out, did he see the handwriting on the wall, or does he have other interests in life that he’d like to pursue?”

There’s no question that in his 14 years as CEO, Beckers, who began his Delhaize career in 1983, helped grow the retailer significantly, nearly doubling the number of stores to more than 3,400 and increasing sales from $17 billion to nearly $30 billion annually.

However, in this case, size really doesn’t matter, productivity does. And by that measure, Beckers has missed the mark almost from the beginning of his CEO tenure. Certainly there’s been a lot written in the past 18 months about the company’s U.S. holdings (particularly its core Food Lion banner) and what’s needed to get them to perform at a high level. That’s led to a leadership change at its Salisbury, NC base (Roland Smith replaced the retired Ron Hodge eight months ago), but Delhaize America’s problems took root more than a decade ago, when Food Lion lost its perception as a discounter and failed to make the necessary changes to protect its image or launch itself in a new direction. Instead, it continued to “milk” its price image while Wal-Mart, Aldi, Save-A-Lot and the dollar store merchants had a field day at Food Lion’s expense. By the time it publicly recognized its shortcomings, other ships had already sailed. The inertia that afflicted the retailer in the U.S. should have been addressed much more quickly by the Beckers, who was the captain of the squad.

Delhaize said it will conduct an internal and external search for a successor (Beckers will remain on the company’s board in a non-executive capacity). Whoever gets the job will have his hands full in fixing an ailing Food Lion, a failing Sweetbay and a bleeding Hannaford, not to mention more intense and diverse competition in Europe.

At Wal-Mart, the leadership situation seems very fluid. Sure, Mike Duke remains CEO, a post he’s held since 2009, but with all the speculation about Duke’s impending departure, this really seems like a “where there’s smoke…” type of story.

When Duke, 63, leaves (and it could be as early as next month’s annual meeting), the two names at the top of everybody’s list to replace him are Bill Simon, 53, who heads the Behemoth’s U.S. operations and Doug McMillon, 46, who runs Wal-Mart’s international business.

The differences between the two are startling. Simon, who joined Wally World in 2006, has experience on the CPG side (Pepsi, RJR Nabisco, Diageo) and served as secretary of Florida’s Department of Management Services under then Governor Jeb Bush. He also served in the U.S. Navy and Naval Reserves for 25 years. Known by his colleagues for his hard-charging, take no prisoners style, Simon deserves credit for improving the company’s domestic sales and earnings since becoming CEO of its U.S. division three years ago.

McMillon is the hometown favorite. He’s an Arkansas native, began as a part-time summer worker in 1984 at one of Wal-Mart’s distribution centers and actually served as a valet for company founder Sam Walton. He’s held numerous positions with Wal-Mart before being named to head the company’s large and complex international unit.

It seems almost certain that Wal-Mart will name a candidate to succeed Duke soon. Exactly when that transition occurs and who the next CEO will be, remains a hotly debated question.